43- -
opinion 489 F.2d 752 (2d Cir 1974). Section 262 provides that no
deduction shall be allowed for personal expenses.
First, petitioners contend that they are entitled to a
deduction for 1990 of a $10,370.80 legal fee paid to an attorney
in 1989 for representing Mrs. Oliver in a criminal case which
arose out of her bookkeeping business.
Respondent does not question that the legal fee is a
properly deductible business expense under section 162(a). See
Commissioner v. Tellier, 383 U.S. 687 (1966), which allowed a
deduction under section 162(a) for amounts the taxpayer spent in
defense of criminal charges which arose out of his business.
Respondent contends, however, that because petitioners are cash
method taxpayers, the amount was deductible only in 1989 when it
was paid.
Section 461(a) provides that deductions shall be taken for
the taxable year which is the proper taxable year under the
method of accounting used in computing taxable income. Section
1.461-1(a)(1), Income Tax Regs., provides that under the cash
method of accounting, amounts representing allowable deductions
shall generally be deducted in the taxable year in which such
amounts are paid.
Petitioners argue that, even though the legal expenses were
paid in 1989, they were not incurred until 1990, which is the
year in which the legal services were performed, and thus they
should be allowed a deduction in 1990. They offered no evidence
Page: Previous 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 NextLast modified: May 25, 2011